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Cruiser Announces Results for the Three Months and Six Ended June 30, 2007

CALGARY, ALBERTA--(Marketwire - Aug. 28, 2007) - Cruiser Oil & Gas Ltd. (TSX VENTURE:COG) ("Cruiser" or the "Company") is pleased to announce its financial and operating results for the three months and six ended June 30, 2007 with comparatives for 2006.

BOEs are derived by converting gas to oil in the ratio of six thousandcubic feet of gas to one barrel of oil (6 Mcf: 1 bbl). BOEs may bemisleading, particularly if used in isolation. A BOE conversion ratio of 6Mcf: 1 bbl is based on an energy equivalency conversion method primarilyapplicable at the burner tip and does not represent a value equivalency atthe wellhead.

OPERATIONS HIGHLIGHTS

- Increased average production by 55% from 2006 comparative quarter to an average of 96 boe/day for the quarter ended June 30, 2007

- Increased petroleum and natural gas sales by 67% to $461,849 for the quarter ended June 30, 2007

The Company's current working interest production is estimated to be 100 boe/day with an estimated additional 125 boe/day behind pipe.

At Swan Hills, the Company completed the installation of a high volume lift pump and the well commenced production in the second quarter of 2007. However, due to unforeseen third party processing and injection facility issues, the well has been shut-in until the facility operator rectifies the problems. It is anticipated that the issues could be resolved by the beginning of the fourth quarter of 2007.

At Willesden Green, the 06-35 well commenced production in April 2007. The 9-34 well has been drilled, completed and tied-in with production commencing in the third quarter of 2007.

Cruiser is making plans for the execution of the balance of its 2007 capital program, as well as evaluating additional prospects for continued growth of the Company.

Douglas L. Meiklejohn, President & Chief Executive Officer

CRUISER OIL & GAS LTD.

This MD&A is dated as of August 28, 2007

This Management's Discussion and Analysis ("MD&A") of financial results and related data is reported in Canadian dollars and has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), and should be read in conjunction with the following:

- The unaudited interim financial statements and accompanying notes for the three and six months ended June 30, 2007;

- The audited financial statements and accompanying notes for the year ended December 31, 2006; and

The MD&A for the year ended December 31, 2006.

Information contained herein includes estimates and assumptions which management is required to make concerning future events, and may constitute forward-looking statements under applicable securities laws. Forward-looking statements include plans, expectations, estimates, forecasts and other comments that are not statements of fact. Although Cruiser Oil & Gas Ltd. ("Cruiser" or "the Company") views such expectations as reasonable, no assurance can be given that such expectations will be realized. Such forward-looking statements are subject to risks and uncertainties and may be based on assumptions that may cause actual results to differ materially from those implied herein, and therefore are expressly qualified in their entirety by this cautionary statement.

This MD&A presents and discusses results on a BOE (barrels of oil equivalent) basis. This presentation may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions in this report are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil.

THREE MONTHS ENDED JUNE 30

During the second quarter of 2007, the Company focused on the completion and equipping of the Willesden Green 09-34 well, the Swan Hills 15-26 high volume lift installation and Willesden Green seismic.

Production for the second quarter of 2007 averaged 96 boe/day as compared to 62 boe/day in the comparative quarter of 2006. The increase in the three months ended June 30, 2007 is from the commencement of production from the Willesden Green and Swan Hills fields. The average price for oil and natural gas liquids was $63.82 per barrel and the average price for gas was $7.36 per mcf during the second quarter of 2007. This compares to the average commodity prices for the second quarter of 2006 of $69.05 per barrel and $6.49 per mcf. The average royalty rate for the comparative quarters was 17% for 2007 and 17% for 2006. Operating costs were $99,370 ($11.43 per boe), compared to $67,223 ($11.91 per boe), in the comparative quarter in 2006.

General and administrative expenses for the second quarter of 2007 were $219,992 as compared to $170,505 in the same period in 2006. The increase was primarily due to increased cost of office premises.

Interest expense decreased in the second quarter of 2007 to $1,118 as compared to $13,512 in the same quarter of 2006. The interest expense for 2006 was payable on the debenture, which was paid out in the third quarter of 2006.

Depletion, depreciation and accretion for the second quarter of 2007 was $276,990 ($31.86 per boe) as compared to the second quarter of 2006 of $173,302 ($30.69 per boe), reflecting a minor increase in the per unit rate and the total dollar amount as a result of increased production.

The loss for the second quarter of 2007 was $148,691 as compared to income of $95,410 during the same period in 2006.

Oil and natural gas revenues increased to $461,849 and $783,371, respectively, for the three and six months ended June 30, 2007 as compared to $276,473 and $477,478 for the comparative periods in 2006. Prices for the Company's production in the three and six months ended June 30, 2007 averaged $63.82 and $61.61 per barrel for oil and liquids and $7.36 and $7.37 per mcf for natural gas, as compared to $69.05 and $60.52 per barrel of oil and liquids and $6.49 and $7.23 per mcf of natural gas for the same periods in 2006. The increased 2007 revenues were primarily a result of increased production and gas prices.

Total production for the three and six months ended June 30, 2007 averaged 96 and 83 boe/day, respectively, as compared to 62 and 53 boe/day in the comparative periods of 2006. By commodity, production of natural gas averaged 312 and 278 mcf/day and oil and NGLs averaged 44 and 36 bbls/day in the three and six months ended June 30, 2007, as compared to 248 and 209 mcf/day for gas and 21 and 18 bbls/day of oil and NGLs for the same periods in 2006.

During the three and six months ended June 30, 2007, the Company incurred operating and transportation expenses of $99,370 and $188,084 respectively, as compared to $67,223 and $100,522 for the same periods in 2006. The 2007 year-to-date operating expenses have increased from the comparative period in 2006 due to increased cost of services plus production from higher operating cost areas.

General and administrative expenses increased to $219,992 and $396,654 respectively, for the three and six months ended June 30, 2007 from $170,505 and $291,227 for the comparative periods in 2006. The increase is a result of higher consulting and professional fees due to additional services engaged to support the increased corporate and operating activity, combined with the increased cost of office premises. The costs on a boe basis were reduced to $25.31 and $26.30 per boe for the three and six months ended June 30, 2007 as compared to $30.20 and $30.09 per boe in the same periods in 2006.

Interest expense for the three and six months ended June 30, 2007 decreased to $1,118 and $2,481, respectively, from $13,152 and $28,434 for the comparative periods in 2006. The interest expense for 2007 relates mainly to the unspent flow-through expenditures incurred in 2007 under the look-back-rule, all of which were incurred by March 31, 2007. Interest expense in the comparative 2006 periods related to the 2005 flow-through share issuance as well as interest on the debenture. This debenture was repaid in full in August 2006.

The Company earns interest on excess funds by investing in term deposits with its bank.

Depletion and depreciation for the three and six months ended June 30, 2007 was $271,635 and $530,387, respectively, compared to $169,852 and $288,206 for the same periods in 2006. The increased amount is a result of both higher production and an increased cost of capital expenditures related to reserve additions.

The obligation at June 30, 2007 is estimated to be $281,035 based on the total estimated undiscounted obligation of $732,320 adjusted for a discount rate of 8% and inflation of 2% over an average reserve life of 13.3 years. Accretion of $5,355 and $9,825, respectively, for the three and six months ended June 30, 2007 compares to $3,450 and $6,784 for the same periods of 2006.

Funds from operations is a non-GAAP measure that represents funds generated from operating activities before changes in non-cash working capital. This is considered a key measure as it demonstrates the Company's ability to generate the funds necessary to fund future growth through capital investment. Funds from operations may not be comparable to similar measures used by other companies.

NET LOSS

The net loss for the three and six months ended June 30, 2007 was $148,691 and $281,570, respectively, compared to income of $95,410 and a loss of $22,679 during the same periods in 2006. The increase in the net loss was a result of higher costs and lower future tax reductions, partially offset by increased production revenue.

During the three and six months ended June 30, 2007, the Company incurred $938,384 and $ 2,893,019, respectively, of capital expenditures as compared to $442,443 and $2,647,489 in the same periods of 2006. During the first half of 2007, the Company completed and tied-in one well and drilled and completed another well, both in the Willesden Green area. Continuation of drilling and completion of the Kakwa 13-01 well and the workover and reactivation of the Swan Hills 15-26 well also took place. During the comparative 2006 six months, the Company participated through the Tango joint venture in the Ansell and Blackstone area plus commenced drilling of the Kakwa 13-01 well.

The Company commenced the 2007 year with working capital of $3,963,431. The net oil and gas revenue plus net interest income was more than sufficient to cover the general and administrative costs incurred during the first half of the year. The capital expenditures in the first six months of 2007 in the amount of $2,893,019 were financed by the funds from operations and opening working capital.

In December 2006, pursuant to a private placement, the Company raised gross proceeds of $4,964,000 of which $1,000,000 was on a flow-through basis. All qualifying flow-through expenditures were incurred by March 31, 2007.

As at June 30, 2007, the Company's working capital has been reduced to $1,214,804. These funds will be utilized to fund the anticipated capital expenditures for the balance of 2007.

The Company has no off-balance sheet arrangements.

Financial instruments consist of those shown on the Balance Sheet.

SHARE CAPITAL

At the beginning of 2007, the Company had 121,891,052 issued and outstanding shares. During the second quarter of 2007, 166,666 options were exercised for an equivalent number of shares and gross proceeds of $16,676 resulting in 122,057,718 shares outstanding as of June 30, 2007 and the date of this MD&A.

The renouncement documents in regards to the 2006 flow-through private placement were filed with the tax authorities in February 2007 and the tax effect of the qualifying expenditures in the amount of $290,000 was recorded. This resulted in reducing the share capital book value and increasing the future tax liability.

Options

At the beginning of 2007 there were 4,495,000 options outstanding. During the first quarter of 2007, 250,000 options expired unexercised and 166,666 options were exercised resulting in 4,078,334 options outstanding as of June 30, 2007 and the date of this MD&A.

RELATED PARTY TRANSACTIONS

The Company had the following related party transactions:

1. During the three and six months ended June 30, 2007, the Company was charged $30,000 and $60,000, respectively (June 30, 2006 - $60,000 and $120,000) in management fees by officers and directors of the Company.

2. During the three and six months ended June 30, 2007, a law firm in which a director of the Company is a principal, charged the Company $10,071 and $13,421, respectively (June 30, 2006 - $nil) for legal services. Accounts payable as at June 30, 2007 includes $13,421 (December 31, 2006 - $42,683) due to the law firm.

3. During the three and six months ended June 30, 2007, the Company was charged $18,543 and $40,562, respectively (June 30, 2006 - $12,959 and $18,859) for accounting and administrative fees by a corporation controlled by an officer of the Company. At June 30, 2007, accounts payable includes an amount of $20,416 (December 31, 2006 - $2,166).

All related party transactions are in the normal course of operations and have been measured at the exchange amount that is the amount of consideration established and agreed to by the related parties under terms similar to those negotiated with third parties.

OUTLOOK FOR 2007

The Company's current working interest production is estimated to be 100 boe/day with an estimated additional 125 boe/day behind pipe.

At Swan Hills, the Company completed the installation of a high volume lift pump and the well commenced production in the second quarter of 2007. However, due to unforeseen third party processing and injection facility issues, the well has been shut-in until the facility operator rectifies the problems. It is anticipated that the issues could be resolved by the beginning of the fourth quarter of 2007.

At Willesden Green, the 06-35 well commenced production in April 2007. The 9-34 well has been drilled, completed and tied-in with production commencing in the third quarter of 2007.

Cruiser is making plans for the execution of the balance of its 2007 capital program, as well as evaluating additional prospects.

BUSINESS RISKS AND UNCERTAINTIES

The Company is exposed to several operational risks inherent in exploring, developing, producing and marketing crude oil and natural gas. These inherent risks include: economic risk of finding and producing reserves at a reasonable cost; financial risk of marketing reserves at an acceptable price given current market conditions; cost of capital risk associated with securing the needed capital to carry out the Company's operations; risk of environmental impact and credit risk of non-payment for sales contracts and joint venture partners.

The Company maintains a comprehensive insurance program to reduce risk to an acceptable level and to protect it against significant losses. The Company's risk in regards to financial instruments is detailed in note 17 to the December 31, 2006 audited financial statements.

DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure. The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of June 30, 2007, that the Company's disclosure controls and procedures are effective to provide reasonable assurance that material information related to the Company, is made known to them by others within the entity. It should be noted that while the Company's Chief Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures provide a reasonable level of assurance and that they are effective, they do not expect that the disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Internal Controls over Financial Reporting

The Chief Executive Officer and Chief Financial Officer of the Company are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. We have assessed the design of our internal control over financial reporting and during this process, we have identified certain weaknesses in internal controls over financial reporting which are as follows:

- Due to the limited number of staff at the Company, it is not possible to achieve complete segregation of duties; and

- Due to the size of the Company and the limited number of staff, the Company does not have the technical accounting expertise and knowledge to address all complex and non-routine accounting transactions that may arise.

These weaknesses in the Company's internal controls over financial reporting result in a more than remote likelihood that a material misstatement would not be prevented or detected. Management and the board of directors work to mitigate the risk of material misstatement in financial reporting. In addition, when complex accounting and technical issues arise during preparation of the quarterly financial statements, outside consulting expertise is engaged. In spite of management's best efforts, there can be no assurance that this risk can be reduced to less than a remote likelihood of a material misstatement.

CRITICAL ACCOUNTING ESTIMATES

The Company's financial statements are prepared in accordance with Canadian generally accepted accounting principles. A comprehensive discussion of the Company's significant accounting policies is contained in Note 2 to the audited financial statements for the year ended December 31, 2006. The Company's significant accounting policies are subject to estimates and key judgments about future events, many of which are beyond management's control. A detailed discussion of the Company's critical accounting estimates is provided in the December 31, 2006 MD&A.

CHANGE IN ACCOUNTING POLICIES

On January 1, 2007, the Company adopted the new or revised Canadian accounting standards for accounting changes, comprehensive income, financial instruments--recognition and measurement and financial instruments--presentation and disclosures as disclosed in note 2 of the June 30, 2007 unaudited interim financial statements. The adoption of the new standards had no impact on the Company's financial statements. Additional disclosure requirements for financial instruments have been approved by the Canadian Institute of Chartered Accountants and will be required disclosure beginning January 1, 2008.

ADDITIONAL INFORMATION

Additional information relating to the Company can also be found on SEDAR at www.sedar.com.